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Chapter 6: Surety Bonds - Coggle Diagram
Chapter 6: Surety Bonds
What is Surety Bonds?
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Written Agreement between the surety who is obligated to obligee, for the payment of money if the obligation set in the bond is not fulfilled by the principle.
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Amount is assessed as the value of the work which the principle is entrusted to do and hand back to the obligee.
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Parties to a surety bond
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Surety
Who is promising to pay a certain amount of the obligee if the principal not fulfilling the obligations.
Contract Bond
Perfomance Bond
Undertake to indemnify the principal against any failure on the part of the contractor to execute the contracts works in accordance with the specifications and terms of the contract and within the time stipulate in the contract.
Supply Bond
To indemnify the principals in the event the material, goods or products supplied by the contractor fall short of the standards set by the principals.
Tender/bid Bond
Provides for payment to the principal of the amount guaranteed if the contractor fails to enter into a contract with the principal after the tender/bid has been accepted.
Maintenance Bond
Provides for the unkeep of the project for a specified period of time after the project is completed
Claim on Surety Bonds
If the principal does not fulfill the obligation under the bond
the obligee can make a claim against the bond.
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The surety company will then look to the principal for reimbursement of the loss and expenses incurred.
Underwritting Process
Analyze the principal's financial standing and business aptitude to determine if the principal has the financial strength and business knowledge to support the bonded obligation.
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Surety company will determine the probability of a loss should the principal be unable to complete their obligations
under the bond .
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